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Asset Protection for your Family: Now and the Future



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Making the decision to file bankruptcy is not easy. It is very important that you have as much information as possible so you can make an informed decision. Take a look around our web site and hopefully we have provided you with a comprehensive overview of bankruptcy, its process, benefits and drawbacks.

Many people are currently experiencing a situation that was virtually unheard of in the past: they owe more on their home than what the their house is worth. A little known federal law allows you to walk away from your A little known federal law allows you to walk away from your 2nd mortgage.

This process has been available for 40 years but it is in today's real estate market that it is incredibly valuable. Click here for additional information.

1. Can I keep my house? What if I owe more on my house than it is worth?
I don't have enough equity to cover my first mortgage, let alone my 2nd mortgage.
Is it even worth trying to keep my house?

A: Although this section of the federal bankruptcy law has been law since the 1970s, it has only gained attention in recent years due to the current real estate market. It is possible that you will pay only a small percentage of your 2nd mortgage (or home equity line) over the time period of the chapter 13 plan.
You need to determine the value of your house and the amount that you owe on your house. The best way to determine the value of your house is to hire an appraiser. Certified appraisers charge approximately $400 in the Winchester area. In some circumstances you might not have to hire an appraiser.

With the current economic times, it is possible that you can write off your 2nd mortgage and never have to make payments on it after you complete your chapter 13 plan. Many homes are "under water" - you owe more on your house than what it is worth. To do a "lien strip", the following conditions must be met:

A. You file a Chapter 13 bankruptcy

B. There is no equity to cover any part of the 2nd mortgage

If you would like to check out other web sites about this, do a search using "mortgage lien strip bankruptcy". There are numerous sites that will discuss this federal law.

2. Can I keep my car if I file bankruptcy?

Most likely. Virginia law allows you to keep a vehicle worth $2,000. If you are still financing the car, you are entitled to equity in the car up to $2,000. If your car equity exceeds $2,000, the homestead deed is another option. See #___ below for an explanation of a homestead deed. As long as you are current on your car payments, it would be very unusual for the bank or finance company to take your car.

3. A creditor garnished my paycheck.
Will the bankruptcy stop that?
Can I get this money back if it has already been taken from my salary?

Although a wage garnishment complicates a bankruptcy somewhat, a federal bankruptcy does take priority over a state court wage garnishment. If your employer has not turned the garnished funds over to the state court before you filed your bankruptcy, you should be sure to attend the state court hearing. You should show the court a copy of your bankruptcy court 341 notice and request to have the funds returned to you. It is your obligation to do this, my office does not represent you in state court hearings unless you retain me to do so.
If the state court hearing is not for several weeks or months after you have filed bankruptcy, my office can file a motion and obtain a Bankruptcy Court Order to have the employer stop garnishing your wages within approximately a week.

If your employer has already turned your wages over to the Court and the Court has also turned your garnished wages over to the creditor within 90 days of the filing of the bankruptcy, it is still possible for you to have these funds returned to you, if the funds exceed $600.

4. Can I file on just some bills?

Many individuals wish to only get rid of certain bills and continue paying on others. ALL DEBTS MUST BE LISTED ON THE BANKRUPTCY DOCUMENTS. However, you may sign a reaffirmation agreement with a creditor and agree to pay a specific bill.

5. Can I file a medical bankruptcy?

One of the main reasons bankruptcy is filed is because of medical bills. Although your bills may be primarily medical, there is no separate bankruptcy proceeding for medical bills. You would file the same type of bankruptcy as anyone else who has just credit card bills.

6. What is the difference between a secured or unsecured debt?

A secured debt is one in which the creditor has the right to take back certain property if you do not pay the bill. Generally car loans are secured.

Real estate is secured. Appliance purchases financed through a store are secured (usually). You must have signed something in writing granting a creditor secured status.

For a car loan to be secured, the creditor must have recorded their secured status on your car title through the Department of Motor Vehicles. If they did not take that extra step, they are unsecured. An unsecured creditor is one who has no claim on any specific property.

7. What is the difference between a chapter 7 and a chapter 13 bankruptcy?
Do I make too much money to file a chapter 7?

The vast majority of individuals choose a chapter 7 bankruptcy. This discharges you from all debts, with the exception of debts you wish to keep. An example of a debt you might keep would be your car debt or your home mortgage. A chapter 7 bankruptcy is faster, easier, and cheaper.

A chapter 13 bankruptcy is also called a wage earner plan. It is for those individuals who have regular monthly income. These individuals set up a plan in which they propose to pay some or all of the creditors, part or all of the debt owed. Creditors can be grouped into different categories and may be treated differently. You may decide to pay one creditor in full although you have decided to pay another creditor nothing. You may also decide to pay a third creditor a portion of what you owe. There must be a reason for treating the creditors differently. A chapter 13 bankruptcy lasts between 3 and 5 years. You must file monthly budgets with the court and account for all money you receive. There are some other advantages for individuals who may have certain debts that are not dischargeable under a chapter 7.

The major reason to voluntarily file chapter 13 is the "lien strip" of the 2nd mortgage. See #1 above. A similar option is available for cars where more is owed on the car than it is worth. To strip the excess lien against a vehicle, the vehicle must not have been purchased in the last 910 days.

Under the 2005 bankruptcy law amendment, there are income restrictions for filing a chapter 7 bankruptcy. In Virginia, an individual who annually earns more than $49,689 or a couple who earns more than $65,342 may be required to file chapter 13 bankruptcy. Additional amounts are allowed for dependents. These figures are not cut and dried. The rules are more complicated than these flat amounts would indicate. There are variations and exceptions to those amounts. As an example, payments that you are required to pay for secured property (your house and your car) are deducted from the above figures. This is true even if you did not actually make those payments. Neither Social Security nor unemployment are counted in this calculation.

8. I have Sears and Lowe's credit cards.
Are store credit cards treated any differently than other VISA or Master Cards?

Possibly. When you applied for your store credit card, you probably signed an application and form that gave the store a secured lien on the property you charged at the store. If you don't pay the store charge, they have the right to take the property back. For example, if you charged a refrigerator at Sears, Sears can require that the bill be paid or you must give them back the refrigerator. You can talk to Sears yourself and ask if they would consider partial payment of the bill in exchange for your keeping the refrigerator. If you charged clothes, sheets, towels, or cosmetics at a store, it is very unlikely they will want these things back. Generally, the stores only request substantial items are returned.

9. Do I have to go to court? Will you go with me?

You must attend the 341 hearing. This is also known as "the meeting of creditors". Although technically this is not "court", it is similar to a court hearing. A trustee is appointed to review your case. You must take an oath to tell the truth. Creditors are notified of this hearing and may attend although it is very rare for most creditors to attend.
Bankruptcy is primarily governed by federal law. Bankruptcy is filed in Harrisonburg at the federal courthouse. The 341 hearing is in Woodstock. Woodstock handles the following counties: Frederick, (including Winchester) Clarke, Warren, Shenandoah, as well as others.

The 341 hearing is typically only a few minutes long. The trustee will ask very basic questions such as whether your residence has changed or if any other facts on your bankruptcy papers have changed. Although your hearing is very short, there will be up to 50 other individuals scheduled for the same time as your hearing. Be prepared to spend at least 3 hours at this hearing while you wait your turn.


10. I bought some furniture at the local furniture store.
I no longer have the furniture because I sold it. What happens now?

Most states make it a crime to sell secured property. Selling secured property is also likely to be a violation of your contract with the store. Because of this, you will most likely have to pay the furniture store something. Most stores will agree that you pay only what the used furniture is worth. Of course, the stores will probably say it is worth more than you think it is.

11. I borrowed some money from a relative but I have paid part of it back.
Is this a problem?

Bankruptcy law provides that you can't treat an insider better than you treat other creditors. If you paid an insider within 1 year of filing the bankruptcy, the court can "undo" this. The trustee will contact the insider and make him or her pay those funds to the court and then disburse that money among all creditors.

12. Can my husband and I file together? Do we both have to file?

You and your spouse may file a joint petition but you don't both have to file bankruptcy. You are each entitled to the exempt property listed above.

13. What household property can I keep? Is someone going to come to my house and go through my things?

Under Virginia law, each individual is entitled to household property up to a value of $5,000. This household property exemption is in addition to the "homestead exemption"

14. What is this "Homestead Exemption"?

Under Virginia law, each individual is entitled to keep up to $5,000 in either real estate or personal property. This can be equity in your home, your tax refund, mobile home, a second car, cash, or any other property that doesn't qualify for an exemption under a different rule of law. The homestead exemption is a once in a lifetime election. If you file bankruptcy again in 20 years, you may add to your homestead deed but, you may never exceed the total allowed ($5,000.00) during your lifetime.

15. Do you mean that I get $5, 000 in household goods, $2,000 equity in a car AND another $5, 000 of property under the Homestead Exemption?


16. There are some family heirlooms that I have, can I keep these?

Virginia has a special law that allows you to keep family heirlooms up to a value of $5,000.

17. What about my wedding & engagement rings?

There is no limit of the value of your wedding and engagement rings. You get to keep these rings even if they are worth a million dollars.

18. What other property can I keep?

There are numerous other specialized areas in which your property may be protected. These include farm implements, tools, business assets, pets, burial lot, bible, medical health aids, proceeds from personal injury or wrongful death claims as well as others.

19. I have children. Does this affect the property that I get to keep?

Yes. For each dependent, your Homestead Exemption is increased by $500.

20. Do some debts have priority over others?

Different types of debts have priority over other debts. This priority determines the order in which debts have to be paid, and how much is paid.

The bankruptcy law defines three categories of debt:
A. Secured debts. These must normally be paid first, and collateral can be repossessed if the debt is not paid.
B. Priority debts are paid second, from the money left over after your secured debts are paid. Taxes, alimony, and child support normally fall into this category.
C. Unsecured debts, which comprise the largest share of most consumer debts. are paid last after secured and priority debts are paid. In Chapter 13, unsecured debts may often be paid at a very small percentage of what is owed.

21. I have student loans. Can these be discharged?

Student loans must be repaid. A rare exception is in the case of hardship. If you are unable to pay the loan because of a hardship, the loan may be discharged. The court has very stiff rules regarding the definition of hardship.

22. I owe the IRS.

While there are a few exceptions, you generally must pay any taxes. This is true whether it is the IRS, State of Virginia or your county personal or real estate taxes.

23. What about my DUI fine? How does bankruptcy affect that?

Criminal fines owed to the government are not dischargeable. You must pay these.

24. What is a reaffirmation agreement?

This is a document signed by you and the creditor in which you agree to pay a specific bill. It must be approved by the bankruptcy court and must be in your best interest to assume this debt. You must appear in court before the Bankruptcy Judge and verify this unless your attorney signs the reaffirmation agreement stating that it is in your best interest to reaffirm the debt.

25. What happens if I sign a reaffirmation agreement and a couple of years after the bankruptcy, I can't pay it?

You are legally obligated to pay any debt that you signed a reaffirmation agreement. If you do not pay, the creditor can take you to court, garnish your wages, repossess the property or do anything he could have done before you filed the bankruptcy. IF YOU SIGN A REAFFIRMATION AGREEMENT, MAKE SURE YOU CAN AFFORD IT IN THE FUTURE.

26. How often can I file bankruptcy?

You can only file a chapter 7 bankruptcy once every eight years. However, if there is a reason that you require protection from your creditors before the eight years have passed, you might be able to file a chapter 13.

27. I lied on a credit card application and said my income was much greater than it actually was. How will this affect me?

A debt that was incurred based on fraud is not dischargeable. You will have to pay any creditor that you have defrauded. Fraud is also a federal crime.

28. What if I used my credit card for "luxury" items? Will this affect my bankruptcy?

The law provides that if you used any one credit card for more than $1000 in the 60 days prior to filing your bankruptcy, these debts are presumed to be non-dischargeable. Luxury goods or services do not include goods or services reasonably acquired for the support or maintenance of the debtor or the debtor's dependent. This rule also includes cash advances from an open-end account.






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